How should I manage cash right after closing on a business?

The first weeks after closing are when a buyer finds out which obligations came with the business and which accounts did not. The aim is to keep the business paying its people and its tax on time while you learn its rhythm. That is mostly set-up work rather than strategy, and the CRA’s own guidance covers several of the steps.

Start with who holds the accounts

The CRA says a seller with employees must close its payroll account, and a seller with a GST/HST account must contact its tax services office to close it. In an asset purchase the buyer may therefore need its own accounts. For a corporation whose shares were bought, the CRA says changes must first be updated and validated with the incorporating authority, and the supporting documents then sent to the CRA. It adds that a change of owners may require changing legal names or registering a new business number and new program accounts, depending on the business.

Plan around payroll remittances

The CRA says you have to register for a payroll program account before the first remittance due date, and its remitting page explains how to find your remitting frequency. Money withheld from employee pay is owed on that schedule, so keep it out of the cash you plan to spend. Ask your accountant for the dates before the first payday, not after.

Check the GST/HST position on the sale

The CRA says a seller may be able to jointly elect with the purchaser to have no GST/HST payable on the sale. One condition concerns how much of the property reasonably regarded as necessary to carry on the business the purchaser acquires under the agreement, and the CRA says the election cannot be made if you sell only one or more assets of your business, or if you are a registrant and the purchaser is not. The CRA publishes form GST44 for this election. If it is not made, tax on the price can change how much cash you need on closing day, so settle it before then.

Record the opening position

The CRA describes records as all of your accounting and other financial information documents. Capture bank balances, receivables, payables and inventory as at closing, and hold a cash buffer until the first payroll and the first remittance are paid. Ask your lender whether the loan terms restrict how the business uses its cash.